Muni Funds Get Top Fixed-Income Ratings

Returning from the bond market backwaters, municipal bond funds now populate eight positions in the TheStreet.com Ratings current list of the 10 highest rated fixed-income funds.

The short maturity side of the bond market received a nod, as nine of the funds on the accompanying table specifically target that end of the fixed-income maturities timeline. In fact, the Wells Fargo Advantage Ultra-Short Muni Fund(SMUAX Quote - Cramer on SMUAX - Stock Picks), the RidgeWorth U.S. Government Securities Ultra-Short Bond Fund(SIGVX Quote - Cramer on SIGVX - Stock Picks) and the Federated Adjustable Rate Securities Fund(FEUGX Quote - Cramer on FEUGX - Stock Picks) hug the ultra-short end of the maturities spectrum.

An upward thrust in long-term interest rates has dampened prices of fixed income securities at that end of the maturity array, thus enhancing the attractiveness of instruments with short maturities. Recent news bulletins with disheartening news about bulging wholesale and consumer prices are likely to perpetuate the unpopularity of longer-term fixed-income investments.

The only fund on the list not specifically targeting short-term or ultra-short maturity fixed income investments is the Colorado Bond Shares Tax-Exempt Fund(HICOX Quote - Cramer on HICOX - Stock Picks). With a 4.75% maximum initial sales charge, HICOX is the only front-end load fund on the list. The fund's three-year annualized return of 4.89% is best of the 10 funds on the list over that time span.

Amplifying the theme of conservative fixed income investing, the list lacks any exposure to corporate bond investing, even of the highest-quality issuers. The two non-muni funds on the list target U.S. government instruments. But even with holdings of ultra-short government holdings, the RidgeWorth fund returned 4.98% over the past year and 4.56% annually over the past three years.

The Federated Adjustable Rate fund, which is 65% invested in U.S. government instruments, enriched its holders by 5.28% over the past 12 months. Bucking the bad rep of anything touching the mortgage sector, the fund is 93% invested in GNMA and other mortgage-backed securities. Yet, its 2.38% gain over the first half of 2008 tops the year-to-date performance of the funds on the list.

TOP-RATED FIXED INCOME FUNDS
NAME, TICKER & TheStreet.com RATINGS GRADE	INVESTMENT OBJECTIVE	YR.-TO- DATE TOTAL RET'N (%)	12-MO. TOTAL RET'N (%)	3-YR. ANN'L RET'N (%)	MIN. INIT. INVESTM'T ($)
Alpine Ultra Sht Tax Optim Inc Inv (ATOIX) A+	Municipal - High Yield	1.66	3.87	3.60	2,500
Colorado Bond Shares Tax-Exempt A (HICOX) A+	Municipal - Single State	1.52	4.21	4.89	500
Federated Adj Rate Sec Inst (FEUGX) A	General Mortgage	2.38	5.28	4.49	25,000
RidgeWorth US Gvt Sec U/S I (SIGVX) A	US Gov'T - Short & Interm	1.97	4.98	4.56	0
Sanford Bernstein Sh-Dur Dvrs Muni (SDDMX) A+	Municipal - National	1.49	4.07	2.91	25,000
SEI Tax-Exempt Tr-Shrt Dur Muni A (SUMAX) A+	Municipal - National	1.68	4.11	2.95	100,000
USAA T/E Short Term Bond Fund (USSTX) A	Municipal - National	1.68	3.93	3.13	3,000
Vanguard Short-Term Tax-Exempt Inv (VWSTX) A+	Municipal - National	1.81	4.45	3.39	3,000
Wells Fargo Avtg ST Muni Bd Inv (STSMX) A	Municipal - National	0.84	3.43	3.23	2,500
Wells Fargo Avtg Ult-Sh Muni Inv (SMUAX) A+	Municipal - National	1.72	4.10	3.51	2,500
Lehman Brothers Municipals		0.02	3.24	2.93
Lehman Brothers Aggregate Bond		1.13	7.13	4.08
Source: TheStreet.com Ratings - Data as of 6.30/2008. For an explanation of our ratings, click here.